There is a growing consensus that digital transformation is a critical value driver for every type and scale of business, but underlying the consensus is not much more than a hunch. There's precious little theory, some empirical evidence provided by unicorn start-ups and just a handful of published case studies from established enterprises.

Most of what is written about digital transformation focuses on means, not ends. There's plenty of noise around process and mindset (design thinking, lean start up, agile development, etc.) but very little about successful strategies and genuine business impact and in particular:

  • changing the growth/profit profile
  • achieving market leadership
  • building new capabilities

So, to bolster consensus with conviction, provide more concrete form and structure and also to remind ourselves that digital transformation has a point, we analysed more than 20 Made by Many client engagements carried out since 2014 to identify patterns in strategy and impact.

The result was rewarding: we identified six distinct digital strategy plays that we have been using consistently and successfully, often by combining two or more of these in a product idea to deliver new value.

This article describes each of those plays using familiar examples, how each might work in different business contexts and our own direct experience of the investment required, the performance achieved, the time to obtain a return and the impact on the business; also, often, how that impact was amplified by combining multiple plays together.

1. Digital adds value to existing products or services

Our most commonly used strategy play is to drive up the value of an existing proposition that has an established customer base.

Increasingly, product differentiators are software applications that add a new layer of access, convenience, control or information to existing physical goods or services. A tractor company makes more profit from GPS-controlled crop sowing applications and generates more cash from maintenance and repair than it does from selling the big expensive physical machines that drill the soil; the quality of the app that remotely controls a DSLR camera might be as strong a differentiator as the speed of its lens or resolution of the sensor; the attractiveness of a current account might be increased for certain customers by the financial advice delivered in real time by the app that is packaged with the account.

This last is a service that we prototyped for HSBC.

In UK retail banking HSBC was a market leader in premium accounts but virtually absent in higher risk current accounts. The question we needed to answer was: would real time advice - behaviour changing nudges - improve financial behaviour and so give access to an entirely new market segment while mitigating the credit risk?

To find out, in just 10 weeks we built a fully operational prototype that gave immediate feedback on payment patterns and balances, integrated with the bank’s live account statements and security sign on. The app was trialled with 500 of the bank’s employees, then 2000 customers, to understand the effectiveness of behaviour change. The result was a strong buying signal, with 77% of nudges receiving positive feedback and evidence of a real improvement in financial behaviour. In the market, the app was rolled into HSBC's Connected Money and more recently the main banking app.

The strategy here is to add a layer of digital information or sensing that takes a different step in meeting the same deep-seated customer need as the existing product; it’s an immediately adjacent (supplementary) offer that doesn’t involve costly changes to the original value proposition.

This strategy has been used successfully by Made by Many in engagements with Carlsberg (helping bars and restaurants become more profitable); with Finnair (strategies for improving customer services); and with artofthetrench.com for Burberry by building the mythology of the brand and the enjoyment of participating in the Burberry story - and doing that so effectively that the company saw an 85% increase in trench coat sales in the first year and 50% increase in e-commerce activity.

2. Disrupting categories and value chains

Removing structural inefficiencies in a value chain or cutting across value chains to break into adjacent sectors.

Incumbents fear disruption, but they can force it too. Digital channels remove much of the cost of cutting across categories and removing inefficiencies in a value chain - but this remains a high stakes game.

Before founding Made by Many we had an early success with jamjar, the Direct Line/RBS start-up that sold new cars on the internet with a category-crushing one week approval or your money back. Jamjar undercut and dis-intermediated tied dealerships through three years from 2000 to 2003 but the expected increase in insurance flow to Direct Line didn’t materialise fast enough to offset high TV advertising costs.

Made by Many has taken at least three clients across the divide between media and retail, with big hits for the Telegraph’s digital fashion section and Five’s Gadget show, using e-commerce partnerships with TV production companies and fashion and consumer goods distributors to create an alternative revenue stream to advertising. We’ve helped Carlsberg evolve from beer sales to business intelligence services (see below) and Colgate to straddle household and health by adding sensors to toothbrushes to diagnose plaque build up and improve cleaning technique.

Cava Grill - a startup and Made by Many client - has disrupted the US downtown restaurant business by employing two complementary strategies, one for meal choice, the other for remote ordering that has transformed the lunch experience for many American office workers.

The proposition uses a mobile app to allow customers to ‘skip the line, order from anywhere’, from a total of 58 million(!) meal combinations inspired by Mediterranean cuisine and selected by the customer from a choice of base (carbs), dips and spreads, protein, topping and dressings.

Cava Grill was the first in the industry to solve the problem of combining immense choice with immediate availability by implementing menu slots that smoothed out demand for its rich but flexible menu. The second component was a mobile and desktop app, designed by Made by Many, that made it easy to construct a personal menu choice from a broad but layered set of ingredients. ‘The app was massive in our scaling, it enabled us to get us from 12 to 94 stores, which is remarkable. It made us one of the best for ordering online’.

3. Finding new ways to exploit old assets

Existing data or IP may have latent value, likewise customer relationships or partnerships - any business asset that can be exploited in a new way to create value for customers.

Every business has cash in the attic and digital products can often revitalise old assets - whether data, intellectual property, loyal customers, capital goods or supply networks - so long as there’s a genuine customer need that can be fulfilled: it’s a bad idea to start by looking for problems the asset can solve; better to identify a need, then find an asset that serves it.

The Ascential Group is the owner of the Cannes Lions international advertising festival. It owns 50 years of entries for awards in advertising on TV, radio, press and social media, a dormant asset that we turned into a new business. The two urgent needs we discovered were training new hires in advertising and making informed responses to pitch briefs; the mechanism for fulfilling this was a powerful search function by brand, campaign, media type, sector or product category, guided by insight into the way users thought about brands and campaigns. The result was The Work a business information service for the marketing industry that provided Ascential with an alternative revenue stream year round. For the private equity investors in Ascential this represented a significant hike in the value of this business division - the investment paid back in less than 12 months.

For Universal Music Group, the closure of independent CD store outlets and chains nullified its strategic grip on the classical music business by removing an essential route to market for its recordings (Spotify and Apple Music, with their pop music-derived search terms, don’t work well with classical genres). And so we built a subscription app that provided a direct channel to market and revived an otherwise moribund asset, with the potential to challenge the monopoly that niche radio stations had created for the casual classical music market.

Carlsberg’s is a more complex story, one that starts with a brief to investigate how digital services might halt or reverse a 50 year decline in on-trade beer sales. Research interviews with bar, hotel and restaurant owners in three widely different geographic markets demonstrated a common opportunity to help improve revenues and profitability by replacing gut instinct decision-making with evidence. The evidence would come from Carlsberg’s own sales data - suddenly a newly valuable asset - and a number of third party data sources; this became the core of personalised machine learning-driven app called Adapt that provided information on beer brand trends, what beer to serve with which foods, local events and weather to aid stock forecasting, comparative sales statistics for similarly sized and positioned bars, restaurants and hotels,etc.: in short, where to set the bar and how to raise it. Not only was the app adopted widely by Carlsberg’s business customers: its users increased order size by an average 9% and there was early indication of increased customer loyalty. Critically, the kind of proprietary data that Carlsberg owned as well as the new data generated about bars and restaurants by the Adapt service itself, becomes a mechanism to isolate the brand from threats by competitors; this is a very difficult service to replicate.

4. New and better channels to market

Opening up new ways to market or deliver aspects of product and service; the goal is to reduce costs, allow more precise targeting or make access and acquisition more convenient to customers.

This was the impulse that drove the internet’s first wave of expansion in the late ‘90s –- until the bubble burst in Spring 2000. The introduction of web-based credit card transactions meant you could buy or sell anything and deliver directly many aspects of service provision (personalisation, ordering, scheduling…). The disruption of value chains that has resulted was profound but this remains one of the most active drivers of digital transformation in finance, travel, local transportation, media and telecoms and of course the onward march of e-commerce and the corresponding carnage in bricks and mortar retailing.

Today in the 2020s energy companies, banks and telcos are still slicing ever more incremental costs off the sale of electricity, current accounts, mortgages, broadband and mobile contracts by designing new and better online or in-store application forms. But channel optimisation can also create competitive advantage, not just cut costs. The aviation industry was one of the first to use networks to bypass physical sales by expensive intermediaries of a commodity (tickets) that shrank in availability in the time it took to sell one. Eventually a duopoly of formerly airline-owned GDS (global distribution systems) emerged that dominated technology evolution and took an ever bigger slice of the price of an airline ticket. Every airline booking system looked the same and was equally awkward to use as they all employed the same badly designed services.

But in 2016 Finnair took the view that loosely integrating a proprietary (and much better-designed) booking engine with the GDS would provide a competitive advantage by making it easier to book their tickets and buy ancillaries. They were right. We helped Finnair design a superior product that worked equally well on mobile and desktop and grew mobile conversion on a beta site by 800%! This is the power of design. Overall, as a result of delivering the mature product on both web and mobile channels, the order value of direct sales increased by 20% and conversion rate by 30%. This is how digital drives revenue growth.

5. Eliminating cost/ time/ process/ error

Improving production processes or product quality by promoting employee collaboration, personalisation, greater accuracy, content creation, timeliness, sensitivity to change, etc.,

Entrepreneurs and inventors have been incorporating software into machines to improve process and reduce costs since Joseph-Marie Jacquard invented his punch-tape driven loom in 1803. In the 1950s a revolution in computing enabled the automation of calculation, form writing and distribution , administration and aspects of communication. Now, with the internet, we have the network. Networks foster collaboration and, for the first time, many-to-many (social) communication. Made by Many’s focus on the media industry throughout the 2010s taught us the value of quick and easy production tools co-designed with their users: journalists and editors. Lately we’ve been developing a range of collaboration and training tools for corporations, such as Skillserve for Carlsberg (an app that bar owners use to train their staff effectively, quickly and economically) and for Nando’s, an international fast casual dining chain, an app that helps employees to manage their shift rota, learn new skills and communicate with their team and managers. The Nando’s app is used on a weekly basis by 77% of employees - an exceptional adoption rate - and saves an estimated £640,000 per annum through reduced on-boarding costs and 4% reduction in employee churn. The resulting quality improvements are anecdotal and incalculable.

The significant lessons about Nandos’ employee app and its role in corporate growth is that the app was designed in collaboration with employees in multiple iterations as it scaled from 1 to 3 to 20 restaurants - and then the nationwide chain of 400. Genuinely collaborative tools need good design and a clear focus on the people who will use them; they have to make their lives better, not simply fulfil ‘business requirements'. Workers expect their business tools to be as good or better than the social media, entertainment and utilities they use in their personal lives on iPhone or Android smart phones. By contrast, enterprise software is generic and isn’t built to gain competitive advantage or with consideration for its users: it does commodity tasks that work for every business or sector. Bespoke employee tools can provide real competitive advantage.

6. Value creating platforms, networks, ecosystems

Enabling the reciprocal exchange of information, goods, or money, usually relying on the value generated by network effects. For example, facilitating transactions between multiple buyers and sellers and creating value from the relationships and data generated

We’ve saved the hardest till last. Building a service that requires network effects - in which the more participants there are, the greater the value each can extract from the service - is no different from selling the first telephone or fax: without reciprocal equivalents they have no value; and so at the very least you have to begin by selling them in pairs or other multiples or by giving them away: you have to prime the pump.

Our one failure out of at least four experiences with building platforms that rely on network effects was with a client who refused to recognise that the service would have to be given away free to early adopters. Nobody joined.

Hailo, the London-based taxi hailing app that matched drivers with customers, launched in 2011 - the same year that Uber launched in San Francisco - with three cab drivers as front men to woo fellow drivers onto the service. Over the next three years Hailo (not a Made by Many client) did a notably intelligent job of adjusting fares and conditions to maintain a workable ratio of cab drivers to customers, ensuring that the former could make money and the latter could find a ride at the speed and price they needed. The essence of a good platform is a correctly balanced exchange of value.

Made by Many’s successes followed this principle; these cases had the advantage of being in situations in which we could piggy-back off an existing network, or there was a ready audience of eager participants with a very poor existing alternative, or none at all.

The first of these was when the UK government youth volunteering scheme, vinspired, asked us to help the organisation become resilient to expected cuts if there was a change of government. Most of its funds went to a third party platform that charged charities to advertise volunteering opportunities to young people. We created a free platform, managed by vinspired, on which both volunteers, charities and activities had profiles and tools to connect with each other and find the right volunteers and the right opportunities. The platform ran for eight years from 2009 serving hundreds of UK charities and hundreds of thousands of volunteers, and continued to work through the austerity regime that slashed government funding for volunteering. Here, the strategy was a takeover, massively undercutting a poorly performing incumbent and able to operate on a low budget with more efficient technology and more effective design.

In 2010 when we started working with Skype, the platform already served 660 million users worldwide. A surprising proportion of them were teachers. Skype asked us to find out what teachers were using the platform for in advance of a marketing campaign. We discovered that they were not looking for lesson plans, as everybody had thought; they were trying to find like-minded teachers or experts to share classes with. And so we built a platform on top of Skype that enabled them to do the finding much more easily, and we also partnered with internationally renowned institutions and authors (like Nasa, or Cressida Cowell) who would give lessons live over Skype. The result was a service that came to connect 100,000 classes globally, in 130 countries, with 3 million children involved. Skype in the Classroom is now a keystone of Microsoft Education.

There's a companion piece to this article: What is a digital product anyway? explores the characteristics of different digital product types: how they work, why they matter and what they do for customers and business...

William Owen

William Owen Founding Partner

William founded Made by Many in 2007 as a truly interdisciplinary product consultancy that would bring together the best of design, engineering and business culture. William advises senior executive teams on digital strategy and product innovation.

@wdowen

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